October 9, 2018

Spain may have to pay developers for retroactive cuts to
feed-in tariffs.

Spain’s solar industry is attracting foreign investors amid
expectations that the Spanish government will be forced to repay cash withheld
through retroactive cuts.

Miguel Ángel Martínez-Aroca, president of Anpier, Spain’s
national association of photovoltaic energy producers, revealed the group’s
members were being approached by so-called vulture funds, investors looking to
buy distressed solar assets, earlier this summer.

“Every day they call us and tell us they’ll buy all we can
offer, all there is,” he told attendees at a meeting to present an annual report
from the association. “There is a disproportionate interest.”

The interest is not new. Funds have been looking to buy
distressed solar projects since soon after the government slashed support for
renewables and put project owners, many of whom had borrowed to build plants,
into financial straits.

But Piet Holtrop, an attorney acting on behalf of Spanish
renewable energy producers, said it is possible the current wave of interest is
linked to developments in the European courts that could see the Spanish
government returning funds to project owners.

Spain’s solar industry has been battling since 2012 to win
back payments promised under a generous feed-in tariff scheme that the
government slashed.

Although the Spanish courts have ruled that cutbacks and the
eventual abolition of the scheme were legitimate, Holtrop believes a case taken
to the European General Court in Luxembourg could overturn that decision.

The European court may decide that Spain's retroactive cuts
were illegal — forcing the government to provide back payments to
developers.

Within a year or two, “things could look very different,”
Holtrop said.

If Spain is forced to pay for retroactive cuts, finding the
money would not be easy. “It’s a calculation that would that would still need
to be made, but it would be a [lot] of money,” said Holtrop.

In any case, though, it could still work out cheaper than
Spain's current strategy: fighting more than 30 multinational asset owners
through international arbitration courts.

Each time Spain loses one of these cases, it is obliged
to repay the expected losses for the entire lifespan of the project in
question.

If Spain accepts that the retroactive cuts were unjust, it
would only have to repay the amounts owed up to now — a significantly
smaller amount.

Investors may also be more attracted to Spain because
a change
in government earlier this year improved the outlook for renewables in
the country.

For example, the previous administration planned to reduce
the "reasonable return" it offered plant owners from around 7 percent
to closer to 4 percent. That move is now “off the table,” Holtrop said.

Instead, Spain is expected to introduce renewable-friendly
policies after the new administration played a key role in pushing for higher
renewables targets across the European Union in June.

This month, for example, Teresa Ribera, the Minister for
Ecological Transition, announced plans to abolish the infamous tax
on the sun introduced by Spain’s previous government in 2015.

The positive shifts will be good for project owners. As a
result, the Spanish solar association, Anpier, is telling its members not to
sell projects, Martínez-Aroca said.

Holtrop said he was advising any clients selling their solar
projects to include a clause that would allow them to benefit from any
government repayment after the sale.